Commercial Real Estate Market Outlook
Industrial – The national industrial vacancy level fell 40 basis points in the fourth quarter, to 11.3%. The industrial sector has now posted 14 straight quarters of vacancy decreases, and the recovery continues to be broad based, with 48 out of 61 markets experiencing decreased vacancy in the fourth quarter.
Total commercial property transaction volume for 2013 was $355 billion, up 19 percent from 2012 according to Real Capital Analytics (“RCA”). Volume increased across all four major sectors, with the largest increase occurring in the office sector, where transaction volume in 2013 totaled $102 billion, up 27 percent from 2012. RCA notes that volume and pricing in the apartment sector began to exhibit signs of moderation in 2013 that are expected to continue in 2014.
According to CBRE Econometric Advisors (“CBRE-EA”), vacancy rates for the three major commercial property sectors showed improvement during the fourth quarter, with only the multifamily vacancy rate increasing:
Multifamily – At the end of the fourth quarter of 2013, the national vacancy rate for multifamily properties was 5.0%, up 40 bps from the third quarter. CBRE-EA expects moderate increases in the vacancy rate going forward, as completion totals approach historical averages and the housing market continues its recovery. As in previous quarters, the strongest rent growth in the fourth quarter occurred in large west coast cities.
Retail – The national retail vacancy rate fell 30 bps, to 12.0%, in the fourth quarter 2013, as retailers absorbed new space during the holiday shopping season. This rate also represents a 70 bps improvement from the same period in 2012. However, record online sales on Cyber Monday indicate a continued consumer shift toward online shopping, a potential headwind for retail absorption going forward.
Office – As of December 31, 2013, the national office vacancy level was 14.8%, down 30 basis points from the prior quarter and 60 basis points in the past year. The suburban office vacancy rate fell for the seventh consecutive quarter, while the downtown rate fell 10 bps in the fourth quarter, negating the 10 bps rise in the downtown vacancy rate last quarter.